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LA Times: Elon Musk’s Tesla Pricing Math Doesn’t Add Up

The LA Times published an article recently taking Tesla CEO Elon Musk to task over claims that the company’s Model 3 vehicle cost $35,000 — after factoring in potential savings on gas compared to a regular car.

In an article titled “No, Elon, the price of the Model 3 isn’t lower just because owners will save money on gas,” the LA Times derided Tesla CEO Elon Musk for his recent claims that the company’s Model 3 vehicles had a “starting price” of $35,000 after multiple tax breaks and fuel saving costs were factored in.

The LA Times explained the current situation writing:

Tesla boss Elon Musk blew up the internet via Twitter on Tuesday — again! — with a tweet declaring that the “starting cost” of the company’s mass-market Model 3 electric sedan has fallen to $35,000.

That would be significant, since the $35,000 electric vehicle has been Tesla’s Holy Grail almost since the company’s inception. The idea has been that Tesla can’t be a mainstream EV company if it’s only selling luxury models for $75,000 and up.

Unfortunately, as numerous Tesla mavens pointed out on Twitter almost instantly after Musk’s tweet landed at 11:05 p.m. Tuesday, it’s not really true. It’s incorrect to imply that the list price of any Model 3 is now only $35,000.

As it happens, Musk and Tesla weren’t really claiming that anyone could buy a Model 3 for $35,000. That figure is their calculation of the cost to a buyer after two factors are netted out. One is the federal government rebate, which is now $3,750 per Tesla vehicle. That’s legitimate to include in the price calculation, since it’s paid directly to the buyer.

The Times further points out that Tesla’s metric of “gas savings” should not be included in the savings estimation of an electric vehicle as the price of gas is not a factor for the owner of an electric car:

The other factor is much more dubious. Tesla calls it “gas savings”— in other words, its judgment of how much less the buyer will spend on gasoline during the putative six-year life of the Tesla, compared to a standard gas-fueled car.

Tesla’s critics, including not a few short-sellers, jumped all over Musk’s attempt to net out gasoline savings from the price of the car. They’re right. No one will drive a Model 3 off a Tesla facility for $4,300 less, unless Tesla intends to give the buyer a point-of-purchase credit of that sum. Tesla isn’t proposing that.

In the words of one tweeter — a self-described EV fan — “There are no ‘gas savings’ realized in the purchase of a vehicle that does not use gas. The $4,300 is never ‘saved’ by the customer. It is ‘paid’ to Tesla. The price is entirely for deception.”

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